Kevin Drum - December 2012

Among other things, Austin Frakt has taught me to view the healthcare market as a competition between providers and insurance companies. If you have a market served by lots of hospitals and only one or two insurance carriers, then the insurance companies have a lot of leverage: they each represent a huge chunk of the customer base and can threaten to take their business elsewhere if a hospital charges too much. In the opposite situation, with only one or two hospitals in a region, they're the ones with the leverage. Even if their prices are high, insurance companies can't withdraw their business because there are no other choices available.

What this means is that "more competition" doesn't necessarily lead to lower prices. Over at Economix, a trio of researchers confirms this using a state-by-state comparison:

We examined the relationship between insurer market power (defined as the market share of the two largest companies) and changes in premiums. We found that concentration of insurer power — hence less competition — was not significantly associated with higher premiums, as can be seen in the chart below.

In English, this means that a small number of big insurance carriers generally led to lower premiums:

Hawaii is a good example. Kaiser Permanente and Blue Cross Blue Shield together controlled more than 90 percent of the insurance market in 2001. In this highly concentrated market, the average premium rose only 72 percent over the decade, compared to an overall increase of 135 percent nationwide. By contrast, Virginia had one of the most competitive markets in 2001, with its two largest insurers controlling only 25 percent of the market, yet premiums in the state increased nearly 140 percent over the period.

I've never been persuaded that insurance companies provide any real benefit in the healthcare market, since what they offer is only barely "insurance" in the usual sense. Mostly they're just intermediaries, with their market power to drive down prices slightly outweighed by their high administrative costs. Net effect: pretty close to zero. It's providers and consumers who really drive prices, not the middlemen. Still, this study suggests that as long as we're stuck with private insurance companies, we're probably better off with a few big, powerful ones. Competition between insurers is just another way of giving providers more leverage, and they're the ones who really control prices.

Over at HuffPo, Peter Stone reports that casino mogul Sheldon Adelson didn't spend $100 million on this year's election, as promised. He spent more like $150 million. Why? Well, he's an obsessive supporter of conservative Israeli politics, and figured that Republicans were more likely to toe the Bibi Netanyahu line than Barack Obama. That much is common knowledge. But Stone says there's more:

Adelson, a fierce critic of Obama’s foreign and domestic policies, has said that his humongous spending was spurred chiefly by his fear that a second Obama term would bring "vilification of people that were against him." As that second term begins, Adelson's international casino empire faces a rough road, with two federal criminal investigations into his business.

This coming week, Adelson plans to visit Washington, according to three separate GOP sources familiar with his travel schedule. While here, he’s arranged Hill meetings with at least one House GOP leader in which he is expected to discuss key issues, including possible changes to the Foreign Corrupt Practices Act, the anti-bribery law that undergirds one federal probe into his casino network, according to a Republican attorney with knowledge of his plans.

During the election, Adelson told Politico that the Justice Department investigation, and the way he felt treated by prosecutors, was a primary motivation for his investment in Republican presidential nominee Mitt Romney and other GOP candidates.

Adelson may not know it, but he must be the luckiest guy in the world. Any other president might very well push the Justice Department at least a tiny little bit to punish a guy who spent so much money to turf him out of office. But Obama? Probably not. It's not that Obama is some kind of saint or anything, but he's about a million miles away from the business-hating, class-warring, Arab-loving, Chicago thug that conservatives have all convinced themselves he is. Adelson will probably never figure that out, since he seems like the kind of guy who considers a 4.6 percentage point increase in his tax rate a massive assault on his freedom, but he'll benefit from it.

Mark Kleiman notes that although Republicans are unalterably opposed to raising tax rates on the rich, the calculus changes after January 1, when the Bush tax cuts expire and rates automatically go back up to Clinton-era levels. After that, it's just a matter of agreeing to lower some taxes but not others, and that's a much easier vote. Plus there will be additional pressure to make a deal:

The reaction from the markets and the corporate sector to the cliff-diving exercise will concentrate their minds. Of course, the CEOs could apply some mind-concentrator right now, but their hatred of Obama is so intense that they’d rather not if they don’t have to, and they don’t think they have to because they can’t imagine that the Republicans on the Hill are so stupid, stubborn, and cowardly that they need to be told.

I was musing about this with a friend just yesterday. Right now there's a strong sense that corporate America is genuinely scared about going over the fiscal cliff and sparking another recession. That's bad for business! On the other hand, the rich people who run corporate America don't want their tax rates to go up. That's bad for their bank accounts! Plus, as Mark says, they really seem to have drunk the "Obama hates business" Kool-Aid.

So what happens? Do they give into their hate and their pocketbooks and stay on the sidelines? Or do they do what's best for their companies and put some heat on Republicans to make a deal? I genuinely don't know which way the corporate frog is going to hop on this one.

The trouble with this analysis, it seems to me, and with the Obama administration's current bargaining position, is that Speaker Boehner has already conceded that he is prepared to raise revenues. So I don't see why Chait is insisting he hasn't.

I think Chait is right. During the debt limit negotiations last year, it turned out that the only additional "revenue" John Boehner would agree to was revenue that we get automatically from economic growth. But this was fairy dust revenue, not a real concession. This time around, Boehner has made vague noises about closing "deductions and loopholes," but so far he's been emphatically unwilling to actually name any of the deductions or loopholes he'd be willing to close. Until he does, he hasn't conceded that he's prepared to raise revenues except in a cheap rhetorical sense. I'll believe Boehner is serious as soon as an actual proposal is on the table and both Eric Cantor and Paul Ryan say they've signed onto it.

The average household already spends about $90 a month for cable or satellite TV, and nearly half of that amount pays for the sports channels packaged into most services.

I knew that sports programming accounted for a big chunk of my cable bill, but I had no idea the chunk was that big. And this is something that's become suddenly more prominent here in Southern California. The Lakers just signed a big new contract that will swell my cable bill, even though I don't watch basketball. Ditto for the Dodgers, even though I don't watch baseball. And ditto again for the Pac-12 network, even though I watch maybe half a dozen Pac-12 sporting events a year. I watch enough sports that I don't mind paying to get ESPN and a few other channels, but these new contracts are likely to add another ten bucks a month to my cable bill for channels I barely watch at all. The numbers are really getting ridiculous for those of us who are only casual sports fans. (And even more ridiculous for people like my sister or my mother, who don't watch any sports.)

The obvious answer, of course, is to offer channels on an a la carte basis—or perhaps on a semi-a la carte basis—but both the content providers and the cable companies fight this tooth and nail. Here's the excuse:

National and local sports networks typically require cable and satellite companies to make their channels available to all customers....The idea of offering channels on an "a la carte" basis used to be sacrilege to the industry. Executives argued it would not lower prices because networks would just charge more to make up for the loss of subscribers.

You know what? That's exactly what would happen. People would start to understand just how much they're paying for sports programming and they'd be appalled. Many wouldn't subscribe, and sports fans would be forced to pay the actual cost of their sports programming without being subsidized by the rest of us. This is exactly how it should be. There's no reason that, for all practical purposes, every single person in the LA area should be forced to pay a tax to the Lakers and Dodgers even if they don't care about basketball and baseball.

Consumers should always assume that they're being ripped off if prices are hidden in some way. In the same way that hidden bank fees are generally good for banks but not so good for the rest of us, the current cable TV system is great for sports providers because it dulls the edge of market discipline, but not so good for the rest of us. The end result of a la carte programming would be more competition between sports providers, which would force them to offer better products, and it would also (probably) result in less money flowing into pro and college sports, which would be an almost unalloyed good. And people like my mother wouldn't be forced to pay $400 per year for programming they have no interest in, merely as the entry fee for having cable TV at all. It's time for a revolt, people.

The Pentagon will send hundreds of additional spies overseas as part of an ambitious plan to assemble an espionage network that rivals the CIA in size, U.S. officials said....They will be trained by the CIA and often work with the U.S. Joint Special Operations Command, but they will get their spying assignments from the Department of Defense.

....The sharp increase in DIA undercover operatives is part of a far-reaching trend: a convergence of the military and intelligence agencies that has blurred their once-distinct missions, capabilities and even their leadership ranks. Through its drone program, the CIA now accounts for a majority of lethal U.S. operations outside the Afghan war zone. At the same time, the Pentagon’s plan to create what it calls the Defense Clandestine Service, or DCS, reflects the military’s latest and largest foray into secret intelligence work.

The Post's sources, naturally, say that this won't really change anything, but that's just not true. Ever since 9/11, the executive branch has been steadily moving assignments around so that they'll be carried out by whichever agency has the loosest rules and the least oversight. Don't like military restrictions on drones? Assign them to the CIA. Don't like congressional oversight of clandestine operations? Assign them to the military. The Pentagon's new plans make these boundaries even fuzzier than before, and allow President Obama to pay even less attention to pesky oversight rules than he has in the past.

Honestly, at this rate I wonder if we should just make the CIA the sixth branch of the military and be done with it. At least then we'd know which rules applied to everyone.